This research explored phonological and morphological awareness among Hebrew-speaking adolescents with reading disabilities (RD) and its effect on reading comprehension beyond phonological and word-reading abilities. Participants included 39 seventh graders with RD and two matched control groups of normal readers: 40 seventh graders matched for chronological age (CA) and 38 third graders matched for reading age (RA). We assessed phonological awareness, word reading, morphological awareness, and reading comprehension. Findings indicated that the RD group performed similarly to the RA group on phonological awareness but lower on phonological decoding. On the decontextualized morphological task, RD functioned on par with RA, whereas in a contextualized task RD performed above RA but lower than CA. In reading comprehension, RD performed as well as RA. Finally, results indicated that for normal readers contextual morphological awareness uniquely contributed to reading comprehension beyond phonological and word-reading abilities, whereas no such unique contribution emerged for the RD group. The absence of an effect of morphological awareness in predicting reading comprehension was suggested to be related to a different recognition process employed by RD readers which hinder the ability of these readers to use morphosemantic structures. The lexical quality hypothesis was proposed as further support to the findings, suggesting that a low quality of lexical representation in RD students leads to ineffective reading skills and comprehension. Lexical representation is thus critical for both lexical as well as comprehension abilities.